Try to develop U.S. market for hazelnuts

Tuesday

Sep 4, 2018 at 5:31 PMSep 5, 2018 at 7:18 AM

This ought to be the best of times for Oregon hazelnut growers, who will begin harvesting what's expected to be a record crop in a few weeks. Instead, they find themselves whipsawed by political and economic forces far beyond their control. Growers' best bet is to insulate themselves from the vagaries of global trade by developing the largely untapped potential of domestic markets.

China delivered the first blow. When China and the United States began their rounds of tit-for-tat tariffs, China appeared to be targeting its trade sanctions on U.S. products that would hurt President Trump's supporters the most — such as pork and soybeans, which are major commodities produced in the nation's red midsection. Yet the U.S. agricultural industry that has been hit with the steepest Chinese tariffs is found almost exclusively in one of the country's bluest states: Oregon, where 99 percent of American hazelnuts are grown.

China has long had a 25 percent tariff on U.S. hazelnuts — in other words, Oregon hazelnuts — plus a value added tax of up to 14.5 percent. In the current trade dispute, China has slapped an additional 25 percent tariff on American hazelnuts. China buys about half of Oregon's hazelnut crop, so the tariffs are a direct threat to the 800 orchardists who grow hazelnuts on 67,000 acres in the Willamette Valley.

Oregon's congressional delegation met with federal trade officials last week in hopes of getting some relief for Oregon hazelnut growers. It's worth a try, but Chinese tariffs aren't the only threat. Inflation in Turkey has caused the value of the nation's currency to crash and slashing the price of Turkish exports — including hazelnuts. Turkey accounts for 70 percent of the world's hazelnut production, so cheap hazelnuts are flooding world markets just before prices are set for this year's Oregon crop.

Hazelnuts are a niche commodity in world markets — so small that China's long-standing tariff has been overlooked in previous trade negotiations. But the concentration of orchards in Oregon makes hazelnuts a big deal locally. The 2017 crop had a value of $73 million, making hazelnuts Oregon's No. 13 agricultural product. A fair price for this year's crop would probably push hazelnuts into the top 10.

Oregon hazelnuts have one advantage in all markets: They are bigger and more flavorful than Turkish nuts, so Chinese buyers have been willing to pay a premium in the past. Whether this advantage will overcome the combination of an additional layer of Chinese tariffs and low prices for the Turkish competition will soon become known.

But the greatest opportunity lies in the domestic market. Per-capita American consumption of tree nuts has grown 240 percent since 1980, according to the U.S. Department of Agriculture. Yet hazelnuts trail far behind almonds, pecans and walnuts in U.S. production and sales volume. A can or jar of mixed nuts sold in an American supermarket, if it includes any hazelnuts at all, is likely to contain the Turkish variety. One of the world's most popular hazelnut products — Nutella, a peanut butter-like spread made of hazelnuts and cocoa — has never caught on in the United States.

There's no reason, other than a lack of familiarity, for the hazelnut's low profile in the United States — and it may be changing. In 2016, the Mars candy company introduced a hazelnut version of its Snickers bar. Burgerville is featuring a chocolate hazelnut milkshake. Larry George, who operates a hazelnut packing plant in Newberg, says American food manufacturers will hesitate to introduce hazelnut products until they can be assured of a reliable, high-volume supply of about 60,000 tons a year, a threshold Oregon growers could cross with this year's harvest.

Turkish competition and Chinese tariffs should also spur the Oregon Department of Agriculture's Hazelnut Commission to redouble its focus on the domestic market. As long as China was willing to buy half of the Oregon crop, incentives to develop an American customer base have been weak. But now, with production increasing and the risks of global markets revealed, the time is ripe for the commission's marketing efforts to concentrate on ensuring that hazelnuts satisfy more of Americans' increasing appetite for nuts. An opportunity may be hidden in the crisis facing Oregon growers.

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